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07 May 2014

Bank of Ghana Governor Henry Kofi Wampah has predicted the cedi and the
economy will stabilise in the second half of the year, when proceeds
from Cocobod’s 2014/15 dollar syndicated loan for cocoa purchases are
received by the central bank.

This year’s loan deal, which is
estimated to be US$1.8billion and the highest Cocobod has raised in two
crop seasons, will be used to purchase beans during the 2014/2015 cocoa
harvest.

“This year we are expecting a bigger crop in terms of
value because the price is higher than last year. It is going to be more
than 50 percent higher than last year, so at least the second half of
the year looks a lot better than what we have in the first half. I
believe that we will see stability going forward,” Dr. Wampah said in an
interview with the B&FT.

The local currency has fallen
rapidly in the first four months of the year after Ghana’s current
account deficit worsened to unsustainable levels and the fiscal deficit
remained high at 11 percent of GDP.

Major import industries such
as car dealerships have borne the brunt of the currency’s slide, which
has also pushed up inflation to a four-year record while damaging
business confidence.

The Governor said the cedi has seen some
stability over the past few weeks, and that the BoG is still monitoring
the impact of its extraordinary policies to stem its steep decline.

The
latest of the policies, announced last month, was an increase in the
cash reserve requirement of banks from 9 percent to 11 percent of
deposits. It followed an earlier hike in the central bank’s policy rate
and tighter regulations on the use of foreign currencies in domestic
transactions.

“We will review [the measures] at our next meeting
and see how developments are. Based on that, if we need to take any
additional action, we will,” said Dr. Wampah.

Asked whether
further tightening of monetary policy is on the cards, he replied: “I
can’t tell if there will be further tightening. It is not a decision by
me alone but a committee that will meet and review all the issues”.

The BoG’s next monetary-policy meeting is likely to take place in June.

Last
year’s cocoa syndicated loan of US$1.2billion will purchase 850,000
tonnes of cocoa beans in the ongoing season which began in October 2013.
Cocobod had previously estimated an output of 830,000 tonnes.